Transparent umbrella under rain against water drops splash background. Rainy weather concept.

Who’ll Stop the Rain? La Niña Keeps Coming

The possibility of a third consecutive La Niña is threatening to bring more rain over spring and summer.

Australia’s Bureau of Meteorology is currently indicating at least a 70% chance of La Niña reforming later this year – triple its regular chances. Triple-dip La Niñas are relatively rare, having only occurred twice since 1950, in 1973-76 and 1998-2001.

“A third La Nina summer will be nationally positive [for farm values], but there will be nuances at a local level,” said Jared Greenville, executive director at ABARES, the science and economic research division of the Department of Agriculture.

According to Dr Greenville, in many areas and farming communities a third season of high rains will lift confidence levels and drive expansion efforts. Farm equity levels are currently high, with debt servicing rations low – leaving farmers in good stead.

There are Two Sides to Every Coin

A third La Niña brings benefits and downsides to rural and regional Australia.

In Australia, May to July rainfall has benefited 2022–23 production prospects of winter crops. Rainfall across eastern and southern Australia has been sufficient to maintain above-average pasture production and support livestock restocking, according to ABARES data.

ABARES data also shows that cropping farm income rose 28 per cent last financial year to $619,000, with livestock farms enjoying a 10 per cent rise to $202,000.

A triple-dip La Niña would mean cheaper water prices, with water storage at historically high levels. ABARES reports that on 25 August 2022, the volume of water held in storage was around 23,200 GL – around 92% of total capacity.

ABARES modelling indicates that the average water allocation price in the southern Murray–Darling Basin (sMDB) will be forecast to remain low in 2022–23 at $58/ML, $9/ML lower than 2021–22.

The north Australian beef production industry is also set to benefit from higher rainfall, with increased pasture availability driving industry momentum.

However, La Niña also indicates a risk of localised flooding and the possibility of a downgrade to wheat and crop prices.

Regions where crop quality could be impacted will probably experience some buyer hesitancy, while farmers in some areas are facing the longest wet period in living memory.

Farmers on the floodplains of the Macquarie Marshes haven’t had a break in rainfall or continuing releases from a full Burrendong Dam upstream. Their land hasn’t had time to dry out in months, leaving them underwater for almost 12 months.

Crop quality and rain impact on horticultural operations were hinted at in Costa Group’s August half-year results announcement. The report reminded investors that, while there has been favourable demand and pricing recently, “extreme weather conditions, including a prolonged La Nina period, have to date impacted quality, premium product packout rates and increased farming costs across all three growing regions.”

Even if official La Niña thresholds are not met, this summer’s above-average sea surface temperatures will likely bring rainfall. At this point, there is a strong chance of a third La Niña and a complementary IOD, which is likely to bring more rounds of flooding rains this spring and summer.

Our industry’s ability to minimise downside in off years and take advantage of good seasons will be crucial to getting through La Niña number three.

Sources: Australian Financial Review, Costa Group, ABARES, Bureau of Meteorology, ABC

Get the latest industry updates

Stay up to date on ag industry news, HR resources and available positions.